AIA: 2008 could prove a record year for the aerospace industry2

Despite the worldwide economic maelstrom, total sales for the U.S. aerospace industry were on pace to reach $204 billion for 2008, a new record for the fifth straight year.

Aerospace Industries Association president and CEO Marion Blakey said during the annual AIA year-end review and forecast in December that while the industry has not been immune to effects of the ongoing global financial crisis, it is showing relative strength.

She added that the total sales figure represents the seventh year of growth in the last eight years.

“This figure represents an increase of 2.1 percent, which is less growth than we’ve seen in recent years,” Blakey acknowledged. “The main reason for the drop was not the tough economic atmosphere, but the work stoppage at Boeing that trickled down through the industry.”

The civil sector saw moderate growth in 2008, up almost $400 million, to $80.6 billion. Because transport aircraft made up the most significant portion of civil aircraft sales by value in 2008, that sector dipped temporarily due to the Boeing work stoppage. But that was countered by helicopter and general aviation aircraft shipments, which were up considerably over previous years, resulting in a net positive trend.

The AIA said that airlines have tempered their fleet replacement and expansion plans due to softening demand, significantly reducing the number of new aircraft orders and deferring delivery dates. Orders began to slow in early 2008, and as the year progressed, rapidly deteriorating market conditions hastened the decline.

Meanwhile, slumping corporate profits and customer financing problems have affected short-term demand for business jets. Large civil aircraft are also affected, AIA said, with airlines facing tighter credit terms. But the association explained that aircraft backlogs provide a measure of longer-term optimism for the industry; Boeing alone has a backlog approximately seven times the current production rate.“We are in an extremely challenging economic atmosphere, but our industry is proving remarkably durable,” Blakey said.

The AIA is forecasting modest sales growth for this year. Sales should reach $214 billion, a figure that is about 2.2 percent more than the total industry would have achieved this year had the Boeing work stoppage not affected the 2008 bottom line. But Blakey conceded, “We are in extremely volatile economic times” that could affect the forecast in the coming year.

Last year, the aerospace industry saw modest growth in every sector–civil aircraft, military aircraft, missiles, space and related products. “This is noteworthy because over the years these sectors were often on different, distinct cycles,” she explained. “When civil aviation was up, military was usually down, and vice versa. To see this balanced growth across the sectors again is a good sign for our industry.”

According to the AIA, the industry will also continue to post strong export numbers, reaching $99.2 billion for the year. That fuels a critically important foreign trade surplus of about $61 billion. It is the largest trade surplus of any U.S. manufacturing sector.

“Our industry will show strength in shipments, orders and backlog, as it did last year,” Blakey said. “Shipments will total an estimated $197 billion, up from $184 billion. The backlog is also extremely strong, totaling $404 billion, an increase from $368 billion in 2007.” She said both shipments and backlog should end up at all-time record levels.